The consequences of the Nigerian National Petroleum Corporation carrying on as the country’s sole importer of refined products finally sank in on April 25. For the second time in recent weeks, finance commissioners of the 36 states returned home empty-handed from the Federation Accounts Allocation Committee meeting following reported under-payment to the central purse by the state oil company. But this is only the beginning; the negative financial impact of the unsustainable fuel importation system will continue to unfold in the days ahead.
When the central role of its remittances to the Consolidated Revenue Fund of the federation is taken into account, the deadlock at FAAC is ominous for the three tiers of government and the economy. It is the proceeds of the CRF that are shared among them at the monthly FAAC meetings. Now, despite years of intent by successive governments to “diversify the economy” and revenue sources, oil and gas earnings still account for almost 90 per cent of export earnings and over 70 per cent of the national budget. For most states, save Lagos, the federal allocations make up between 70 and 90 per cent of their funding. The economic misery of the country was triggered by a crash in global oil prices and the effects of the ensuing recession it just exited linger with 27 states owing salaries, unemployment and inflation remaining high at 18.8 per cent and 15.37 per cent respectively by December 2017, according to the National Bureau of Statistics.
When, therefore, the NNPC became the sole importer of petrol and, on behalf of the Federal Government, began to underwrite subsidy costs that government spin doctors call “under-recovery,” the 36 states and 774 local governments should have been alarmed.
In countries where public officials are more alive to their responsibilities, the alarm would have given way to panic and sensible policies when Maikanti Baru, the NNPC Group Managing Director, bandied figures of 55 million litres supplied to the market per day and plans to raise this to 100 million litres per day, all imported by a monopoly notorious around the world for opacity.
There is no other destination but financial ruin for a country that runs its economy like Nigeria. Allowing a state-owned enterprise to be the sole importer of a commodity that can easily be produced locally, allowing that company to determine quantity and fund the subsidy with funds that are constitutionally required to be remitted to a central pool for all tiers of government, defies logic.
With landing price per litre rising from N171 to N190, but pump head price capped at N145 per litre, the NNPC funds the subsidy with at least N26 per litre. Finance Minister, Kemi Adeosun, laboured in vain to differentiate between six and half a dozen when she insisted that “technically today, there is no subsidy” in terms of paying cash to importers, only under-recovery; but in the same breath admitted that “they (NNPC) are losing money, which means effectively that the loss is being borne by everybody and it reflects in the Federation Account.” Result of such doublespeak was brought home to FAAC, which was confronted with leaner funds, the fallout of “under-recovery.”
Nothing confirms President Muhammadu Buhari’s attenuated credibility and lack of economic acumen than his disastrous handling of the NNPC. Instead of the promised reforms of the corporation and oil industry, he has given it even more wiggle room. Corruption in the NNPC ran riot under the immediate past government, but it was not for lack of oversight. The overseer was simply corrupt.
Nigeria and the CRF are at the mercy of the NNPC because alone among the 12 members of the Organisation of Oil Exporting Countries, it depends entirely on imported petrol even with a 2.3 million barrels per day crude production, importing $5.8 billion (N1.77 trillion) worth of petrol in the last two months of 2017, according to Baru.
Nigeria should be ashamed to be the world’s largest importer of petrol, taking in one million tonnes of PMS per month. Data compiled by STATISTA revealed refining capacity of 2.89mbpd in Saudi Arabia; 1.87mbpd in Venezuela; 1.78mbpd in Iran; 707,000bpd in the United Arab Emirates; 900,000bpd in Iraq, and 657,000bpd in Algeria. Nigeria’s four refineries have installed capacity for 445,000bpd but hardly work.
Buhari should end this national sickness: he should sell off the refineries without further delay and formalise incentives to attract investors to join the Dangote Group in building new refineries to meet domestic demand and for export. The country has paid too heavy a price for relying on imported petrol. Apart from the free-for-all of 2011 when subsidy gulped N2.53 trillion, it took N1.35 trillion in 2013 and N1.31 trillion in 2014. Whether as subsidy payments or “under-recovery,” the federal, states and LGs will continue to lose trillions of naira, while we deplete our foreign reserves sustaining jobs in other countries.
Everything should be done to encourage private investment in refineries post-haste, while reforms should be launched to detach the NNPC completely from the downstream and lure independent marketers back to the import business.
Buhari should fulfil his electoral promise to break up the NNPC, overhaul its operations and stamp out corruption and the opacity that allows it to flourish.
Evil thrives when critical stakeholders stay aloof: the NNPC is the country’s cash cow; therefore, state governors and legislators at every level should take the lead in pressing for radical change at the corporation.
